Grading Wisconsin
Comparing the fifty state governments to one another and grading their
relative performance is a daunting task. Nonetheless, that is precisely
what the Pew Center on the States does in its 2008 State Management Report
Card.
The Pew report collects data on four basic areas of public management in
each state — information, employees, money, and infrastructure — and then
assigns each state government a letter grade from A to F.
The Pew report gives Wisconsin state government an overall grade of B-.
The report gave 46 states Bs or Cs, so Wisconsin’s grade is about in the
middle. Utah, Virginia, and Washington all received A-; New Hampshire got
a D+. The letter grades get our attention, of course, but the real story
is in the underlying analysis of each state.
As we might expect, the report downgraded Wisconsin for its structural
budget deficit, which was $2.44 billion at the end of fiscal 2007. On the
upside, the report commented positively on Wisconsin’s handling of
infrastructure maintenance, especially roads and bridges — an area where
many states falter. New Jersey, for example, has overdue maintenance on
its roads and bridges totaling $13 billion.
Somewhat surprisingly, the Pew report was critical of Wisconsin’s
management of state employees. The report criticized Wisconsin for not
paying its bills on time because “Wisconsin simply doesn’t have enough
staff to process the bills.” Staff shortages are due in major part to Gov.
Doyle’s goal of reducing state government by 10,000 jobs.
In addition to staff shortages, the Pew report notes that Wisconsin is
suffering a drain of its most veteran and knowledgeable employees. “Hiring
freezes, ongoing budget disputes and a lagging pay scale help explain why
Wisconsin has the second-highest turnover rate in the country for veteran
employees,” the report says.
The Pew report continues: “The irony is that Wisconsin is widely
acknowledged to have a high-quality workforce. Its challenge will be to
iron out some of the current problems before too much lasting damage takes
place.”
Having the second-highest turnover rate in the nation for senior state
employees doesn’t bode well for the long-term effectiveness of Wisconsin
state government. This is a warning that deserves attention.
On the whole, the report’s evaluation seems objective and insightful. The
Pew Center on the States, a division of the Pew Charitable Trusts, has
provided a valuable service to state officials and concerned citizens
alike.
You can read the entire 2008 State Management Report Card on-line at
www.pewcenteronthestates.org/gpp.
Dan Thompson
Volume 102, Number 4 - April 2008
More Deficits
Last September in the middle of the state budget
stalemate, I wrote a column entitled “Deficit Budgeting and the Politics of
Compromise.” I argued that deficit spending is particularly seductive when
each party controls one house of the state legislature.
The political dynamics are simple. We have only two ways to correct an
unbalanced budget: either cut spending or raise taxes. Democrats in the
Senate won’t agree to cut spending; Republicans in the Assembly won’t agree
to raise taxes. The only compromise they can agree on is deficit budgeting,
which allows both sides to protect their core values. And in the next
election, they can always blame the other party for the deficit.
I also warned last September that the longer the budget stalemate lasted,
the more unbalanced the final compromise would be.
In mid-February, less than four months after the biennial budget was
enacted, the non-partisan Legislative Fiscal Bureau (LFB) issued a
re-estimate of the budget deficit. The LFB reported a decrease in estimated
tax collections of $586.5 million due to the slowing economy. The report
also identified a couple of smaller hits. In total, the budget deficit is
now $652.3 million worse than the estimate four months ago. We still have 15
months until the close of the current biennium on June 30, 2009. That’s
plenty of time for more bad news.
The LFB report also warned about three court cases that could take another
$600 million out of the state budget:
The Ho-Chunk are contesting in federal court the tribal gaming revenue assumed in the budget.
The Wisconsin Medical Society filed suit challenging the transfer of money from the Patients Compensation Fund.
Businesses are contesting tax payments on computer software. The Appeals Court ruled that the state cannot collect the tax. Unless the Supreme Court reverses, the state’s general fund will lose another $293 million before the biennium ends.
You can read the full report at: <http://www.legis.state.wi.us/lfb/Misc/2008_02_13_Revenue%20estimates.pdf>.
In response to the LFB report, the Doyle administration announced that it
will use existing authority to roll over about $125 million in short-term
debt. That action helps the current budget, but it doesn’t cut
spending or raise taxes. It just digs a deeper hole for the next budget.
Governor Doyle announced that we do not need to raise taxes to correct the
deficit. He also emphasized his continued support for K-12 education and
medical assistance. Those two items consume over 54 percent of the state’s
general fund budget.
The next three biggest items in the state budget are the UW system, shared
revenues, and prisons. Gov. Doyle is not likely to recommend big cuts in the
UW system. Prison spending cannot be cut much when we have thousands of
people behind bars.
More deficits in the state budget will put increasing pressure on state
officials to cut shared revenues for municipalities.
Dan Thompson
Volume 102, Number 3 - March 2008
Rural Sprawl
Last August, Mike Slavney from Vandewalle & Associates gave an insightful
presentation at our Chief Executives Workshop on “Rural Sprawl and Its Impact
on Cities and Villages”. The most dramatic part was his comparison of new
development at five homes per acre versus new development at one home per five
acres.
At five homes per acre, streets and public services were compact and
energy-efficient, and we still had enough land for farming. At one home per
five acres, the new development was costly to serve and wasteful of energy,
and farm land disappeared at an alarming rate.
Mike’s point was clear. At five homes per acre, Wisconsin can accommodate
considerable new growth. At one home per five acres, we run out of land and
money in a hurry. That discussion is being replayed in many parts of the state
but nowhere is the debate sharper than in Dane County.
The Capital Area Regional Planning Commission (CARPC) recently proposed new
policies for future development in Dane County. In commenting on CARPC’s
proposed rules, Mayor Jon Hochkammer of Verona pointed out many of the same
problems with rural sprawl that Mike Slavney warned about last August.
Here is a small part of Mayor Hochkammer’s comments:
Mayor Hochkammer is exactly right about the dangers of large-lot rural sprawl and the advantages of compact urban development. The politics of reducing rural sprawl, however, gets complicated because large-lot rural homes are popular with many people, so we have many state policies that accommodate — or encourage — rural sprawl by making it cheaper to live in the country and drive to work. And even if one part of the state —like Dane County — adopts tight restrictions on rural sprawl, the marketplace will create opportunities for development to jump over the county line, making the commutes to work even longer. Conserving farmland is a lot like conserving fossil fuel. Most people agree that both are good ideas, but we hate to give up our trucks and SUVs.
Like Mayor Hochkammer, all city and village officials have
a key role to play in helping our citizens make the difficult transition to
sustainable communities. And the sooner we start, the easier the transition
will be.
Dan Thompson
Volume 102, Number 2 - February 2008
|
Getting Ready
for DTV
|
Volume 102, Number 1 - January 2008
Let Restaurants Compete
We frequently hear speeches in the State Capitol
proclaiming the virtues of competition. From cable television to health
care, the argument is the same: Providing choices to consumers will foster
competition between service providers, which in turn rewards efficient
businesses with more customers, drives down prices, and increases profits.
The argument is powerful because it is fundamentally sound. That’s one
reason we hear the “competition is good” argument so often in the State
Capitol. The complex problems of both cable television and the health care
system cannot be solved by competition alone, but true and meaningful
competition is an important first step.
For some businesses, however, legislators are reluctant to talk about
competition. Take restaurants for example.
Opening a new restaurant has to be a complicated, expensive, and risky
venture under the best of circumstances. Good service and tasty food are not
enough to launch a successful new restaurant. A restaurant also needs a
liquor license, if it is going to compete for the supper crowd.
Would-be owners of a new restaurant collide with Wisconsin’s archaic quota
system, which limits the number of liquor licenses a municipality may issue.
In many parts of the state, the only way to open a new restaurant is to buy
an existing tavern and move the liquor license to a new location. That’s
expensive and wasteful.
It also stymies revitalization projects that need upscale restaurants to
anchor mixed-use commercial districts.
In November a bipartisan group of 27 legislators introduced companion bills
to address this problem. The legislation is Senate Bill 322 and Assembly
Bill 584. The legislation would exempt full-service restaurants from the
current quota on “Class B” liquor licenses. The bill defines a full-service
restaurant as one where meals are prepared, served, and sold for consumption
on-premise and in which the sale of alcohol beverages accounts for half or
less of the restaurant’s gross receipts.
Despite Capitol speeches on the benefits of competition, AB 584/SB 322 faces
an uphill battle precisely because it encourages competition. Those who hold
existing liquor licenses don’t want competition. A reporter asked Peter
Madland, Executive Director of the Tavern League of Wisconsin, why his group
opposed the exemption for full-service restaurants. He answered bluntly by
saying, “Obviously, the more licenses there are, the more it decreases the
value of existing licenses.”
If your community needs more full-service restaurants to encourage tourism
and economic development, now is the time to call your legislators. Tell
them your municipality needs AB 584/SB 322 and ask for their support.
Dan Thompson
Volume 102, Number 12 - December 2007
From Columbine High to
Virginia Tech
The core mission of municipal officials is making our communities great
places to live. We achieve that mission by providing good public services at
the lowest possible cost. The public services range from handling emergency
911 calls to routine trash collection — and everything in between.
Those great services don’t mean much, however, if our community is not a
safe place to work and play. That’s why municipal officials spend so much
time and money on law enforcement and public safety issues. They are the
foundation on which we build great communities.
Controlling violent crime has always been a top priority for municipal
leaders, but in recent years it seems like the challenge has gotten bigger —
especially violence among young people. The tragedy at Columbine High School
taught us a hard lesson eight years ago. The slaughter of 33 students and
teachers at Virginia Tech last April served as an ugly reminder.
Mayor Bart Peterson of Indianapolis argues that we cannot merely wait for
the next big tragedy and then arrest the shooter. By then, the damage is
done and people are dead. He argues that municipal leaders need to
understand the causes of violent, self-destructive behavior in young people,
so we can focus on preventing the next tragedy.
Mayor Peterson is especially concerned about the impact of media violence on
our children. Television, movies, and video games show graphic depictions of
murders, rapes, and assaults. These violent images bombard kids 24/7. It’s
no wonder that some become desensitized to violence.
Under Mayor Peterson’s leadership, the National League of Cities (NLC)
joined with the National Parent Teacher Association (PTA) to look more
closely at the impact of media violence on kids. The joint effort included a
Summit on Media Violence last April in Indianapolis.
The NLC has posted a webcast from the Summit in its website. The website
includes research reports on the influence of media violence on youth. It
includes a report from the Federal Trade Commission on marketing violent
entertainment to children, statements from the American Academy of Child &
Adolescent Psychiatry, information from the TV Parental Guidelines
Monitoring Board, a family guide to video games, and a PTA brochure on video
game ratings. There’s even a four-minute clip showing samples of the
violence on television and in video games marketed to children.
I suspect many municipal officials agree with Mayor Peterson that media
violence makes our communities more dangerous places. But it’s such a
pervasive reality in our culture that most local officials don’t know how to
tackle the problem. The NLC’s website will show you ways to get started in
your community. Go to
Dan Thompson
Tax Comparisons
The U.S. Census Bureau compiles data on state and local government finances
from all 50 states. Earlier this year the Census Bureau released its report
on state and local finances in fiscal year 2004-05. It's a vast amount of
data and somewhat difficult to interpret.
Fortunately, the Wisconsin Taxpayers Alliance (WTA) released a nice summary
of the Census Bureau data a couple months ago. The WTA summary is much
easier to understand.
One of the most-watched numbers in the WTA summary is Wisconsin's tax
ranking compared to other states. Wisconsin dropped two places in the
ranking from sixth highest to eighth highest among the 50 states.
The overall tax burden in Wisconsin, however, didn't really decrease. Our
tax rates remained about the same. What actually happened is that two states
— Rhode Island and Alaska — increased taxes a bit and jumped ahead of
Wisconsin on the list. Still, eighth is closer to the middle of the pack
than sixth, so we've improved our competitive standing slightly.
Wisconsin's ranking in tax burden didn't surprise me much. It's about what I
expected.
The WTA summary also reported the total general revenue that state and local
governments collect. The data is reported both in dollars and as a
percentage of personal income.
In 2004-05, Wisconsin's state and local general revenues totaled $36.7
billion, which equals 20.8 percent of the personal income of Wisconsin
residents. That's a lot of money, but how does it compare to other states?
According to the WTA summary, state and local general revenues in all 50
states totaled $2,020.9 billion, which is exactly 20.8 percent of all
personal income nationally. Wisconsin was exactly average. In fact,
Wisconsin ranked 29th on the list.
Despite ranking eighth in taxes, Wisconsin is only average in the amount of
money we have available for general government services. How is that
possible?
The WTA article shows that Wisconsin relies more on taxes — especially
property taxes and income taxes — than most states. Wisconsin also relies
much less than other states on revenues from fees and from the federal
government.
Wisconsin's revenue policy also makes life especially difficult for
municipal officials because we collect the property taxes and take most of
the heat from angry citizens. As a simple matter of self-protection,
municipal officials need to know more about ways we can reduce the burden on
our citizens.
Jack Norman presented a very good workshop on that subject at our annual
conference last month in Milwaukee. He is research director of the Institute
for Wisconsin's Future and the title of his presentation was “Are Wisconsin
Taxes Too High?”
Understanding the current tax system and how it was created is the first
step toward making the necessary changes. I encourage municipal officials to
take a look at Dr. Norman's research on the web at
www.wisconsins
future.org.
Dan Thompson
Volume 102, Number 8 - August 2007
Novick in
Milwaukee
The League will hold its 109th Annual Conference next October at the Hilton
Hotel in downtown Milwaukee. We take the conference to Milwaukee every four
years, and it is always a wonderful place for us.
This year I am especially looking forward to our keynote speaker, Joey
Novick. Joey has spoken at nine state league conferences from Maine to
Nevada and has won rave reviews. Joey is a professional comedian, speaker,
and trainer who knows local government up close. He has served as a council
member in Flemington, New Jersey, since 1995, including a couple of years as
Council President. His keynote address is “Politics Unusual: The Dollars and
Sense of Humor in Government.”
Joey has also agreed to present a preconference workshop in the morning
before his keynote address. The preconference workshops are three hours and
allow more time to cover topics in depth. Joey’s topic at the preconference
workshop is “Dealing with Difficult People … with Humor.”
Al Arnold, former mayor of Rice Lake, will offer a preconference workshop on
the “people side” of local government. Politics is all about people — what
they want and what they hate. Al has written an excellent book on the topic,
and everyone who attends his workshop will get a copy.
Our third preconference workshop is not about people; it’s about money. The
title is “How Tax Incremental Financing Works and Why.” Our moderator is J.
Michael Mooney, Chairman, MLG Development. The League is co-sponsoring this
workshop with the Wisconsin Chapter of NAIOP — the National Association of
Industrial and Office Properties. A lot of NAIOP members will attend, so the
workshop offers a great opportunity to meet developers, owners, and
investors in major real estate projects across Wisconsin.
Those who do not want to sit indoors for a preconference workshop can take a
walking tour of the downtown with Milwaukee Mayor Tom Barrett. The group
will walk east on Wisconsin Ave. to the river, north on the riverwalk to
Wells Street, then east to city hall. The mayor and other city officials
will describe the history and redevelopment of downtown Milwaukee and the
fabulous riverwalk project. The event also includes a tour of Milwaukee’s
historic city hall, followed by a catered lunch.
We are meeting in the first week in October, which is a bit earlier than
usual. The preconference workshops and the “Trek with the Exec” start at
9:00 a.m. on Wednesday, October 3. The Opening General Session starts at
1:30 p.m. that afternoon.
Thursday is our workshop day with sixteen topics for local officials, plus
another four programs focused on engineering and public works. At the
Business Meeting at noon we will elect League officers and vote on
conference resolutions.
On Friday morning, we will open with David Ward on regional economic
development, and we have invited Governor Doyle to present his remarks at
the conclusion of the conference.
It looks like a great program from start to finish. The registration form is
on page 254. Please join us in Milwaukee on October 3rd.
Dan Thompson
Volume 102, Number 7 - July 2007
Tearing Down Walls and Connecting People
A couple months ago I wrote a column about the proposed Charter Towns Bill,
which would create a new hybrid municipality in Wisconsin and freeze municipal
boundaries. In that column, I said the bill was bad public policy because it
builds walls to keep people in.
Today, I’d like to focus on some good public policy to tear down walls and
help people connect with each other. Connections between people come in many
forms. One of the most important is a transportation system that allows people
to move freely from place to place.
Wisconsin has a solid network of local roads, but we pour a lot of property
tax money into that system. Property taxes pay over 80 percent of the cost of
constructing and maintaining local streets in our cities and villages. The
balance comes from local transportation aids funded by the gasoline tax.
In May, the Village of Rib Lake in Taylor County opened bids for slag sealing
a portion of McComb Avenue. The low bid was over $13,000. The Village bid a
similar job two years ago — same process, same contractor, same street, same
distance — but the low bid was under $6,000. The cost more than doubled in two
years.
In a letter to his state representative, Village President Wayne Tlusty put
the matter succinctly when he said, “No municipality can sustain a street
maintenance program with a two percent cap, flat revenue sharing and
decreasing highway aids.”
Our transit systems face equally big challenges. In 2003, the Fond du Lac Area
Transit System lost 36 percent of its federal funding and 32 percent of its
state funding. The Green Bay and Fox Cities systems will lose large amounts of
federal assistance after the 2010 census. The Milwaukee County Transit System
is the last major urban transit service in America to be funded by property
taxes. Our rural communities have many more elderly citizens who depend on
shared-ride taxi systems.
We need to find ways to keep people connected. It’s good for our communities
and vital for our economy. That’s why the League has joined with a coalition
of groups supporting legislation to allow local governments to create regional
transportation authorities, or RTAs.
RTAs have been very successful in other parts of the country — from Chicago
metro to South Florida, from the Pikes Peak region to Orange County
California. In fact, Wisconsin is the only Midwestern state that lacks
comprehensive enabling authority for local RTAs.
We will provide more information on the RTA proposal at our Chief Executives
Workshop in August, including a panel discussion of the key elements. The
details vary from state-to-state and region-to-region, so we have a variety of
options to consider.
But the goal of the RTA proposal is clear: We need to find better and more
efficient ways of connecting people to each other. We already have enough
walls keeping them apart.
Dan Thompson
|
Volume 102, Number 5 - May 2007
Building Walls
to Keep People In
By:
Dan Thompson, Executive Director
"Charter towns" that have $100 million in equalized property value, 24-hour police service, and 10 percent of their residents on public sewer or water service, qualify for additional rights and powers, including:
The Department of Administration estimates that
about 135 towns have populations over 2,500 and could qualify as
charter towns. |
By: Dan Thompson, Executive Director
A couple weeks ago, Gov. Doyle introduced his executive biennial budget for 2007-09. Since then we've been scrambling to figure out exactly how the Governor's proposal will impact cities and villages in Wisconsin. We've reported that information in our weekly Legislative Bulletin.
Now it's the legislature's turn to work on the budget.
The nonpartisan Legislative Fiscal Bureau will soon release its analysis of the budget bill, and the Joint Committee on Finance will start the public hearing process. By mid-April the Joint Committee on Finance will begin its detailed work on specific budget items. One by one the Committee will vote on hundreds of individual items culminating in a final Committee vote on the whole package, probably in late May or early June.
As a result of the election in November, the houses are split between the political parties, so Joint Finance has eight Republicans and eight Democrats. When the committee was evenly divided from 1996 to 2002, the committee often deadlocked 8-8 along party lines. That may happen again, or the 16 members of Joint Finance may be able to craft a compromise budget with broad legislative support.
In either case, we should take a closer look at the current makeup of the Joint Committee on Finance. Who are these 16 legislators?
Let's look first at the eight Republicans. According to the biographies on the state's web site, five are baby boomers born between 1946 and 1963. One was born just before the baby boom, and two were born in 1968. Six have college degrees, including Rep. Kitty Rhodes (R-Hudson) who earned a Master of Arts degree from Illinois State University.
Six of the Republicans have past experience in local government, including a county supervisor, two school board members, two city council members, and a mayor. Three are serving their first term on Joint Finance. The senior Republican is Sen. Alberta Darling (R-River Hills), who was appointed to the committee in 2001.
The eight Democrats are a little older than the Republicans. Two were born during World War II; four are boomers; one just missed the boom in 1964; and the youngest was born in 1968. Six of the Democrats have college degrees. Three have graduate degrees. Sen. John Lehman (D-Racine) has a Master of Education degree from Carthage College. Sen. Lena Taylor (D-Milwaukee) and Rep. Pedro Colon both have law degrees.
Five of the Democrats have past experience in local government, including four county supervisors and a city council member. Three are serving their first term on Joint Finance. The Senate Co-Chair of Joint Finance, Sen. Russell Decker (D-Weston), has served on the committee since 1995. Sen. Robert Jauch (D-Poplar) served previously on Joint Finance from 1991 to 2001 and rejoined the committee in 2007.
All in all, it's an experienced group of legislators on both sides of the aisle. They're going to need all the experience and skill they can muster given the state's daunting budget deficit.
We will watch the work of Joint Finance closely in the weeks ahead and keep you informed.
By: Dan Thompson, Executive Director
Some people believe that elections don't matter very much. The belief is especially common among people who don't bother to vote. Election results matter a great deal, however, to professional politicians.
Politicians spend a lot of time studying election results. They especially want to know which hot-button issues got incumbents defeated. Professionals then hustle to get on the right side of the issue to avoid defeat in the next election. Ethics reform is a good example.
Early last session, Sen. Mike Ellis and ten other legislators introduced Senate Bill 1 to improve the enforcement of ethics regulations governing state officials. S.B. 1 was intended to clean up the legislature following the recent criminal convictions of six leading law-makers. S.B. 1 passed the Senate easily by a vote of twenty-eight to five.
In the Assembly, S.B. 1 went to the Committee on Campaigns and Elections, chaired by Rep. Steve Freese, (R-Dodgeville), who also held the position of Speaker Pro Tempore, an important leadership office.
In January 2006, the Committee held a public hearing on S.B. 1. A few weeks later, Rep. Freese offered an amendment to S.B. 1 requiring all local public officials to file a statement of economic interests with the new state Accountability Board. The amendment looked like a "poison pill" tactic designed to increase opposition to S.B. 1. If that was the intent of the amendment, it worked perfectly. Local officials opposed the amendment vigorously, and in April, the Republican Assembly Caucus voted to kill S.B. 1 without scheduling the bill for a floor vote.
When Rep. Freese campaigned for reelection, however, he learned just how unpopular his "poison pill" amendment was with the folks back home in Dodgeville and Darlington and Spring Green. In the November election, voters in the 51st Assembly District turned Steve Freese out of office, after sixteen years in the Assembly.
Many professional politicians attributed Freese's defeat to the defeat of S.B. 1 and ethics reform. That's why the new leaders of the legislature, both Republicans and Democrats, announced a Special Session in January to adopt major, bipartisan ethics reform. Like S.B. 1, the proposed reform will merge the State Elections Board and the State Ethics Board into the new Government Accountability Board free from political appointees, but also free from "poison pill" amendments.
Why the change of heart since last April? Because the new leaders recognized that some incumbents got defeated in the last election because they were on the wrong side of the ethics issue. And the new leaders don't want to lose more seats in the next election, so now they're supporting ethics reform.
And that's why we have elections in America.
By: Dan Thompson, Executive Director
The elections are over. Now comes the hard work of governing. The first order of business in the State Capitol is adopting the 2007-2009 biennial budget.
Governor Doyle and the Wisconsin Legislature face big challenges with the next budget, but not the extreme deficits they confronted four years ago. The Wisconsin Dept. of Administration (DOA) projects a deficit of $1.6 billion over the next two years. That's about half the size of the deficit going into the budget process four years ago.
According to DOA, state agencies requested almost $14.2 billion in General Program Revenue in the first year of the biennium ó up about $825 million, or 6.2% ó from this year. Three of the biggest requests are:
$220 million increase for the Dept. of Public Instruction, mostly to fund 2/3 of the cost of K-12 education.
$131 million more for the Dept. of Health and Family Services, primarily for Medicaid.
$120 million increase for the Dept. of Corrections for prisons.
These are the agency requests. Gov. Doyle may make significant changes before his budget goes to the legislature in early February. You can see the full DOA report online at http://www.doa. state.wi.us/docs_view2.asp?docid=6185.
After the governor submits his request, the sixteen members of the Joint Committee on Finance get their chance. With the Senate and the Assembly divided between the parties, Joint Finance will have eight democrats and eight republicans.
Joint Finance was evenly split from 1996 to 2002, making the budget process difficult and drawn-out. In 1999, the legislature gridlocked and didn't produce a budget until October 6th ó three months into the state's fiscal year. In the gridlock years, Assembly Speaker Scott Jensen and Senate Majority Leader Chuck Chvala could not agree on much of anything.
Today the Legislature has a new leadership team. Sen. Russ Decker (D-Weston) and Rep. Kitty Rhoades (R-Hudson) are the new co-chairs of Joint Finance. Sen. Judy Robson (D-Beloit) is the new Majority Leader, and Rep. Mike Huebsch (R-West Salem) is the new Speaker of the Assembly.
I don't expect to see such extreme delays this time, but the division between the Senate and the Assembly will slow the budget process. The big question is whether the Joint Committee on Finance, even moving slowly, can produce a compromise budget acceptable both to Democrats in the Senate and to Republicans in the Assembly. That's not an easy task.
Curt Witynski, the League's Assistant Director, has put together a very nice preview of the upcoming legislative session. [His article starts on page 6.] It's shaping up to be a lively legislative session.
By: Dan Thompson, Executive Director
In this issue of the Municipality we print the last installment of our four-part series entitled "The ABCs of Economic Development" by Jonathan Bartz. The series offers local officials a basic introduction to economic development.
Just a few years ago, economic development meant building an industrial park near the highway and extending sewer and water service. Today, having a nice business park is merely part of the challenge - the easy part.
In his final article, Jonathan Bartz underscores the key point: the distinction between community development and economic development has largely disappeared. Today's entrepreneurs need talented workers, so entrepreneurs must locate their businesses in communities where talented workers want to live. That means an attractive, well-rounded community with good schools and outstanding cultural and recreational opportunities.
Donald Nichols, Professor Emeritus of Economics and Public Affairs, UW-Madison, gave the keynote address at our annual conference in October on the topic of "Wisconsin in the Changing Global Economy: It's Impact on Our Communities." Prof. Nichols' remarks provided the macroeconomic foundation for Jonathan Bartz's practical advice.
Prof. Nichols described the change from the old economy of automobiles and consumer goods to the new economy of pharmaceuticals and computer software. The old economy needed low-skilled workers on an assembly line. The new economy needs talented, creative workers in the laboratory.
The low-skilled assembly jobs have gone to China, but those were not the jobs of the future anyway. The assembly line was the economic engine of the 20th Century. The research park is the economic engine of the 21st Century. To prosper in today's Creative Economy, our communities need to become what Prof. Nichols called "knowledge-based clusters" of workers - like Irvine, California, or the Raleigh-Durham Research Triangle or a dozen other places in America.
It's important for local officials to understand just how rapidly the world is changing around us. That's the main reason we invited Prof. Wendy Crone to give the Closing Address at our annual conference in October. Her topic was "Nanotechnology in the 21st Century."
Jonathan Bartz and Prof. Don Nichols told us how we have evolved in economic development. Prof. Crone showed us where we are headed in economic development. It's a world that makes science fiction look ordinary.
I encourage all municipal officials to take another look at Jonathan Bartz's four-part series. You can see all four parts on the League's website under "municipal topics," then click "economic development."
And I also suggest that local officials learn a little more about nanotechnology. Our ability to manipulate the nanoworld will change the workplace as dramatically as the harnessing of electricity in the 20th Century. Here's a good website to start with http://mrsec.wisc.edu/nano.
By: Dan Thompson, Executive Director
I talk with a lot of city and village officials about the problems facing their communities. Time and time again, local officials tell me their two biggest challenges are: 1) competing for economic development in the new global market, and 2) paying for the sky-rocketing cost of health care.
That's why we've selected economic development and health care as the two featured topics at the Opening General Session of our 108th Annual Conference in Middleton on Wednesday, October 11.
Our first keynote speaker is Donald Nichols, Professor Emeritus of Economics and Public Affairs, UW-Madison. His topic is Wisconsin in the Changing Global Economy. We all know that the Wisconsin economy has changed radically in the past two decades, but few of us understand why or how. Or understand what may be coming at us in the years ahead.
These broad issues of macroeconomic policy are complex, to be sure, but Professor Nichols does a brilliant job of explaining the big trends in simple language. He describes clearly both the threats - and the opportunities - that our communities confront in the new global economy. The more we understand these forces, the better job we can do as local officials to position our communities to thrive in the 21st century.
Our second keynote speaker at the Annual Conference is David Newby, President of the Wisconsin AFL-CIO. His topic is Wisconsin Health Care Partnership Plan: Solving Our Health Care Crisis. The Wisconsin Health Care Partnership Plan was formally introduced on April 25 as Senate Bill 698. We described the plan in our Legislative Bulletin No. 2005-59 dated April 28, 2006, which is available on the League's website.
The League's Board of Directors strongly endorsed S.B. 698. In simple terms, the plan is a labor-management coalition to provide mandatory health insurance for all private and public employees in the state. The plan creates a massive buying pool that will allow us to bargain effectively with clinics, hospitals, and drug companies to get the very best prices available anywhere.
The plan is gaining momentum week by week with workers and business leaders across the state. Dave Newby will give us a timely update and tell us the next steps to be taken in solving our health care crisis.
These two keynote addresses will get the 108th Annual Conference off to a great start, but they're just the beginning. You can see the full program on page 384, and don't overlook the three pre-conference workshops on Wednesday morning.
We hold the conference at the Marriott West in Middleton once every four year. It's a great facility. Please join us there on October 11-13.
By: Dan Thompson, Executive Director
A year ago, the Governor and the Legislature proudly adopted a "no tax increase" state budget. The budget bill also included a freeze on municipal property taxes.
Well, the freeze on municipal property taxes is still in place, but state taxes seem to be simmering along quite nicely.
According to recent newspaper accounts, state income tax payments are running ahead of the official projections from last January. In the 2004-05 fiscal year, the state actually collected $5,650.1 million in individual income taxes. The last official estimate for the 2005-06 fiscal year was $6,025 million - an increase of $347.9 million or about 6.6%.
Now, the unofficial revised estimates apparently put individual income tax payments at $6,080 million for the 2005-06 fiscal year, an increase of 7.5 percent over the previous twelve months.
Estimates for sales tax collections have not changed since last January, but the numbers remain healthy. The official estimate for the 2005-06 fiscal year is $4,181.6 million - up $143 million over the previous 12 months - or about 3.5 percent.
I'm delighted that the economy of the state of Wisconsin is doing better than expected. That's good news for all of us. And the state treasury certainly can use the extra cash. The Governor and the Legislature face an opening "structural deficit" of almost $700 million in the next budget. A $75-million windfall in tax collections will at least make a down payment on the deficit.
That's good news. What troubles me is the double standard we use to describe state taxes compared to local taxes.
The Governor and the Legislature did not change the sales tax rate or the income tax rate, but more money pours into the state treasury as personal incomes and personal spending increases. State officials call this a "no tax increase" state budget.
Now compare that to what happens with local budgets. According to the Wisconsin Taxpayer Alliance, the average municipal tax rate in 2006 was $6.38 per $1,000 of property value, a 12.1 percent drop since 2002.
When city and village officials actually cut property tax rates, state officials call it a tax increase and impose a levy freeze.
When the state treasury takes in hundreds of millions of dollars more this year than last year, state officials call it a "no tax increase" budget.
It seems to me a classic example of a double standard. One standard for local budgets; a different standard for state budgets.
As we get closer to the November elections, local officials can expect to hear this double standard time and again in campaign speeches. The only real solution is for voters to get annoyed by the double-talk and punish state officials for using it. We'll see if that happens in this election.
By: Dan Thompson, Executive Director
At a meeting in May of 1997, the League's Board of Directors was discussing the future of municipal finance in our communities. One of the directors commented that property taxes and shared revenues were outdated mechanisms for moving local government forward into the 21st century. He concluded with a succinct and telling description when he said, "The real problem is we have hitched our wagon to a dying horse."
Now, nine years later, the National League of Cities (NLC) has released a new research paper entitled Taxing Problems: Municipalities and America's Flawed System of Public Finance. The NLC's main conclusion? The horse is still dying.
Our nation's system of public finance is woefully out of date. America's economy has undergone drastic changes in the past hundred years, but our system of public finance remains largely tailored to fit the horse-and-buggy economy of the 19th century.
The NLC report identifies four key challenges:
The system is unfair. The shift from goods to services, together with the rise of the "knowledge-based economy," has created a mismatch between economic activity and the frameworks of a 19th- and 20th-century revenue system. This mismatch - and the underlying structural imbalances it creates - places an unfair burden on specific economic sectors, industries, workers, and communities.
Intergovernmental partnerships are unraveling. From preemption of local taxing authority to partisan bickering, cooperation and partnership are in sharp decline.
Needs are changing. Rapid increases in urbanization, population, and immigration - together with the aging of our society and other demographic shifts - present all levels of government with significant challenges.
Governance itself is under fire. Citizens demand more and better services at the same time local governments feel the pinch from new limits on taxation.
To overcome these challenges, the NLC report sets out nine "Guiding Principles." From equity to productivity to transparency, the nine principles serve as cornerstones for rebuilding public finance in 21st century America.
A full description of the nine "Guiding Principles" requires more space than I have available in this brief column. I encourage all local officials, however, to take a hard look at the new NLC report. You can call our office in Madison at (800) 991-5502, or you can read the report on-line on the NLC's website.
The NLC report does not give us all the answers, but it does give us a solid basis for judging just how sick the horse really is.
By: Dan Thompson, Executive Director
A couple months ago, a mayor called to tell me he was giving a speech on municipal finance. He knew the numbers for his own community, but he wanted a broader perspective. He asked me to identify and quantify the biggest trends in municipal finance over the past 20 to 30 years. Here's what I told him.
The two biggest trends are: 1) increasing reliance on the property tax to fund municipal government; and 2) shifting more of the property tax burden to homeowners. Both trends are easy to document.
The Wisconsin Department of Revenue (DOR) publishes an annual report on County and Municipal Revenues and Expenditures. The most recent report available is for calendar 2004. The chart below compares 1986 to 2004.
Total general revenues for all cities and villages in Wisconsin
(in millions of dollars rounded)
| Type | 1986 | 2004 | % change |
| Local taxes | $663 | $1,895 | 286% |
| Intergovernmental Rev. | 808 | 1,211 | 150% |
| Other Rev. | 363 | 803 | 221% |
| Total | $1,834 | $3,909 | 213% |
"Local taxes" means basically the property tax. "Intergovernmental Revenues" is mostly state shared revenue plus local transportation aid and federal aid. "Other" includes everything from special assessments to fines and fees to interest income.
From 1986 to 2004, total municipal revenues more than doubled - from $1.8 billion to $3.9 billion. In the three categories, Other Revenue more than doubled, Intergovernmental Revenue went up by half, and Local Taxes almost tripled.
The reason for the increased reliance on property taxes is obvious. For many years, the state adjusted shared revenues annually for inflation. In 1996, the legislature and the governor committed to fund two-thirds of the cost of K-12 education. Since then, funding for shared revenues has declined from $1,008.6 million in 1996 to $952.3 million in 2005.
The second big trend, shifting more of the property tax burden to homeowners, is even easier to see. In January 2005, the Legislative Fiscal Bureau (LFB) published Informational Paper #13 on property taxes in Wisconsin. A table in the LFB paper shows net property tax by category since 1970. Here are the numbers ($ in millions):
| Type of property | 1970 | 2003 |
| Residential | $526.1 | $4,916.5 |
| Commercial | 202.0 | 1,520.2 |
| Manufacturing | 184.1 | 292.7 |
| Other | 127.2 | 372.9 |
| Total | $1,039.4 | $7,102.3 |
| Type of property | 1970 | 2003 |
| Residential | 50.6% | 69.2% |
| Commercial | 19.4 | 21.4 |
| Manufacturing | 17.7 | 4.1 |
| Other | 12.2 | 5.3 |
| Total | 100.0% | 100.0% |
In 1970, residential property owners paid 50.6% of all property taxes. In 2003, they paid 69.2% of the total. Last year, they paid over 70%.
The LFB paper describes the main reasons for the shift. The legislature took big chunks of business property off the tax rolls in the 1970s and big chunks of farm land off the tax rolls in the 1990s. There are other reasons, including the changing nature of the Wisconsin economy.
Both of the two big trends in municipal finance are easy to see, but the impact gets magnified when both trends collide on the property tax bill of the average homeowner. In 1986, we used state shared revenues and other aids to pay for 44% of city and village services and property taxes to pay for 36%. Today those percentages are more than reversed - 48% local taxes to 31% shared revenue. And the gap continues to grow.
At the same time, we are focusing more and more of the property tax on homeowners. This double whammy for homeowners shows up most clearly in the top line of table.
Look at the number again. In 1970 residential owners paid $526.1 million in property taxes. In 2003, they paid a little over $4.9 billion - an increase of more than nine fold in 33 years.
It's not surprising to me that homeowners are angry about their property tax bills. That's what happens when the state legislature shifts the burden from sales and income taxes to property taxes and shifts the burden from business owners to home owners.
By: Dan Thompson, Executive Director
Turn the clock back two years and think about what happened at the end of the legislative session in June 2004. The session ended without TABOR, the Taxpayer's Bill of Rights, coming up for a vote in either house. A few days later, Assembly Speaker John Gard sent Senate Majority Leader Mary Panzer a public letter demanding that the Senate join the Assembly in convening an extraordinary session to vote on TABOR.
Initially, Sen. Panzer rejected the idea. After a few weeks of being bashed on conservative talk radio, she reversed her decision and called the Legislature into extraordinary session for Tuesday, July 27, 2004.
The Assembly refused to vote on TABOR before the Senate took action, but Speaker Gard promised that he had enough votes for passage. He did not indicate, however, which version of TABOR had enough votes.
After meeting in caucus for hours, Sen. Panzer announced on July 28 that she did not have the seventeen votes required for passage of TABOR in the Senate. TABOR was knocked out for the session. A few months later, Sen. Panzer was also knocked out. She lost the republican primary to Glenn Grothman, a stalwart supporter of TABOR.
In January 2005, the Wisconsin Legislature convened a new session, and TABOR got a new name - the Taxpayer Protection Amendment. The main difference being that TPA is two letters shorter than TABOR. A year went by and nothing much happened until February 2006 when the TP Amendment was formally introduced.
On April 27, 2006, the State Assembly finally took its first vote on TABOR/TPA. By a vote of 32 in favor and 66 against, the Assembly rejected the original, conservative version of TPA.
Later that night, actually 4:38 A.M. the next morning, the sleep-deprived Assembly voted 50 to 48 to approve a reduced version of TPA that applied only to the state operating budget and included a huge loophole for the road-builders lobby.
Rep. Frank Lasee, author of the original TABOR, voted against the state-only version of TPA and complained publicly about the loophole for the road-builders lobby. In response, Speaker Gard called Rep. Lasee a "press release conservative who doesn't care about getting anything done."
The fight then moved to the State Senate while Assembly members caught up on their sleep. The Senate rejected Senate Joint Resolution 63, the broad version of TPA, by a vote of 21 to 11. The two-to-one margin was almost identical to the 66 to 32 vote against the broad version in the Assemble. The Senate also rejected the state-only version of TPA by a vote of 20 to 12 and went home for the session.
When Mary Panzer announced two years ago that there weren't enough votes to pass a constitutional amendment, conservative talk radio commentators demanded an up-or-down vote. Well, the Senate voted last month, and the vote wasn't even close - proving that Mary Panzer was right.
By: Dan Thompson, Executive Director
A couple years ago I heard a retired U.S. senator describe his reason for leaving office. "I asked a constituent if he believed in limiting senators to two terms. The guy replied that every senator should get two terms: one term in the Senate, and one term in prison."
"That's when I knew it was time to retire," the old senator said.
Last week I attended a service club luncheon. Asked to offer his words of wisdom for the day, one of the members said, "Politicians and diapers should be changed frequently - and for the same reason." It got a big laugh, of course, from folks who had never served in public office.
On Friday, February 3, the front page headline in The Capital Times announced "Many Seats, No Candidates". The subheads were "Holding public office loses shine" and "Local recruiting tough." The story recounted in detail the difficulty of getting people to run for local office in community after community.
The center piece of the article, however, was the village of Black Earth, where not a single candidate filed for any of the three seats on the Village Board. The seats will be filled by write-in votes, assuming the top three vote-getters are willing to accept. If not, the Village Board will fill the seats by appointment.
The news from Black Earth hit me especially hard. It's a nice community, and I know it pretty well. Local officials from Black Earth have been extremely active in the League for many years. Indeed, three League presidents in the past forty have come from the village of Black Earth.
Today, nobody wants to put their name on the ballot. That's a sad sign for representative democracy.
Most of the "politician" jokes and sarcasm are aimed at full-time state and national officials, I know, but the public's negative view spills over to part-time local officials as well. The Capital Times article quoted a veteran town official who described the mood this way:
"People get turned off after a while. You have travelgate, Watergate, this gate and that gate. People say, 'What the hell would I want to run for?'"
Serving in municipal office has always been a tough job, of course. With property tax freezes, the TABOR debate, and the proposed Taxpayer Protection Amendment, the challenge is getting tougher.
We have slightly over 4,000 elected city and village officials in Wisconsin. Of that number, 700 to 800 leave office every year. That's a turn-over of just about twenty percent, which means the average time in city or village office is about five years.
For those of you leaving office in April, whether it has been two years or twenty, thank you for your service. For those of you remaining in office, thanks for continuing. And don't let the mean jokes and sarcasm get you down. Building democracy is noble work.
By: Dan Thompson, Executive Director
On December 12, Gov. Jim Doyle issued a press release on the "Success of Property Tax Freeze." The release included an analysis showing " that homeowners across the state will see dramatic property tax relief because of the historic property tax freeze he signed into law."
The press release also highlighted the Governor's meeting with a homeowner in West Allis whose property tax bill went down by $3 this year and another meeting with a homeowner in Madison whose bill declined this year by $55. Republican leaders immediately replied with press statements claiming that property taxes would have gone down even more under their freeze, which Governor Doyle vetoed.
Too bad neither side called me. I could have given them some ten-year numbers to brag about.
My wife and I bought a three-bedroom house in Madison in 1995. The house was only three years old when we got it, and we haven't made any big improvements. The assessed value has increased more than inflation, but nothing major. I think our house is pretty close to average in Madison.
Here are the property taxes my wife and I have paid on our home since 1996, our first full year of ownership:
| 1996 | $3,950 |
| 1997 | $3,765 |
| 1998 | $3,764 |
| 1999 | $3,521 |
| 2000 | $3,705 |
| 2001 | $3,660 |
| 2002 | $3,740 |
| 2003 | $3,871 |
| 2004 | $3,820 |
| 2005 | $3,868 |
If you want to check the numbers, my payment history since 1999 is available on-line from Dane County. Just click on "Access Dane" and go to parcel information.
In 1997 the state began paying two-thirds of the cost of K-12 education, which explains the drop from 1996 to 1997. After ten years, the property taxes on my house are down $82. Now that's what I call a tax freeze.
Both the Democrats and the Republicans in their December press releases claimed bragging rights for the property tax freeze this year. They missed the opportunity to brag about freezing taxes on my house for the past ten years.
One of the great ironies of the partisan battles in the State Capitol is that neither side wants to claim victory for long-term success. Both sides prefer to brag about last year's quick fix or next year's bumper-sticker slogan.
Holding down property taxes is simply not a one-year freeze. It's a long-term task that takes hard work and thoughtful planning by hundreds of state, county, municipal, and school district officials. Hundreds - perhaps thousands - of state and local officials have contributed their efforts to freezing my property taxes for the past ten years. They deserve the bragging rights.
By: Dan Thompson, Executive Director
The increasing cost of health care for municipal employees is one of the biggest challenges facing local officials. And with health care going up ten percent or more every year, there's no end in sight. To help us find a solution, the League's Board of Directors invited David Reimer to speak at our Annual Conference in Green Bay two months ago.
The Board chose David Reimer because he understands the challenge first-hand from his experience as director of administration for the City of Milwaukee and as state budget direct for Governor Jim Doyle. For the past year, David has served as director of the Wisconsin Health Project.
On Friday morning, October 28, David spoke to a group of about a hundred municipal officials at our conference in Green Bay. He only had forty-five minutes to cover a huge topic, but he made a compelling argument for massive changes in the way we finance health care in Wisconsin.
In a few minutes with a handful of simple charts, David outlined the Wisconsin Health Plan. I won't attempt to go over all the details here. You can see them for yourself online at: www.wisconsinhealthproject.org. Let me just hit the three key points at the heart of the plan: 1) Every Wisconsin resident under age sixty-five gets health insurance; 2) every person has a choice of health care plans and providers; 3) every Wisconsin employer and employee pays a tax to fund the system.
Point 1 is easy to understand. Everyone under sixty-five gets health insurance, including half a million people in Wisconsin currently without health insurance. It eliminates much of the "shifting" that escalates costs under the current system. It also eliminates a major deficit in Wisconsin's Medicaid program that pushes up state taxes.
The plan provides choice and incentives for everyone, modeled on the current - and very successful - state employee health plan. Health insurance companies, clinics, and hospitals compete for our business. People who choose high-cost plans pay the difference, which gives health care providers a powerful incentive to hold down costs. If the cost goes up or the quality goes down, people can take their business elsewhere.
The total cost of the plan is about $13 billion a year. The money comes from an assessment - or tax - on employers and workers. Employers pay an amount equal to twelve percent of payroll. Small employers pay somewhat less on a sliding scale. Workers pay two percent of their wages.
Employers now spend an average of fifteen percent of payroll for workers' health care premiums, so a tax of twelve percent plus two percent doesn't look so bad, especially if it eliminates double-digit cost increases that nobody can afford.
David Reimer describes the Wisconsin Health Plan as a work in progress, but I think he's made a lot of progress already. A Milwaukee Journal Sentinel editorial on November 26 put it quite well: "Unless this nation tackles the problem of health care more aggressively and creatively, it will face dire social and economic consequences. In the face of shameful federal inaction, Wisconsin must step in. [Reimer's plan] is a great place to start the discussion."
Revised Sunday, May 11, 2008